Continuing post-takeover woes at Morrisons are creating uncertainties at Dairy Crest.
The processor has been hoping the retailer would be the last of the major supermarkets to undertake a review of its milk sourcing arrangements, and award new and bigger contracts in its favour.
Dairy Crest’s notice period from Tesco expires at the end of this month, after which 170m litres of its liquid milk a year will no longer have a home.
Morrisons shares its 400m-litre or so annual volume equally between Dairy Crest, Arla and Robert Wiseman, but the store is rumoured to be considering a consolidation of suppliers.
A contract win for Dairy Crest
would bring its liquid business back on track. However, progress from Morrisons on any consolidation plans is said to be slow.
Asked about this at a recent press conference, Sir Ken Morrison said that the issue was still being discussed and that no decision had yet been made.
Dairy Crest’s policy has so far been to try to ride out the losses by winning new business elsewhere, rather than to close a liquid dairy plant, which would send out negative signals. Hopes have rested on Morrisons for some time.
Dairy Crest’s need for a liquid market tonic is also linking it to a takeover of the 200m-litre Midlands Co-operative Dairy, also believed to be a target for co-op Dairy Farmers of Britain.
Strategically the purchase would be a logical geographical move north for Dairy Crest. The lack of any significant northern-based liquid milk processing operation was one of the main factors behind the Tesco and Asda contract losses.
Dairy Crest chairman Simon Oliver has adopted a policy of not building new plants, because he doesn’t want to add to the industry’s overcapacity.
Chris Walkland